Fears mount for Vauxhall as GM picks Magna

Canadian firm Magna is the preferred bidder for Opel/ Vauxhall - which could be bad news for the UK.

Last Updated: 06 Nov 2012

General Motors surprised many pundits today by announcing that Canadian car parts manufacturer Magna is its preferred bidder for Opel/ Vauxhall, its European operation. Beforehand, all the talk was that GM had decided to hang on to Opel and try to ride out the recession – but it seems to have been persuaded otherwise by German Chancellor Angela Merkel, whose government is stumping up €4bn in loan guarantees to make the deal happen. With 25,000 German jobs at risk, you can see why she was so keen – but since cuts will have to be made somewhere, Magna’s success doesn’t bode well for Vauxhall’s 5,500 UK staff...

A sale to Magna never really seemed like GM’s favoured option. In an ideal world it would probably have liked to keep hold of what’s still a lucrative business (particularly since it will presumably be a competitor in someone else’s hands). And even though GM was forced by the rules of its taxpayer bailout to seek a sale, it had previously indicated that it preferred a rival bid, from Belgian private equity firm RHJ International. Still, by promising to protect all Opel’s German factories, Magna managed to enlist a powerful ally in Merkel – she’s been lobbying hard for them with the GM board ever since, and has also put her money where her mouth is. She does have an election coming up, after all...

So what will the damage be for the UK? Well, Magna has promised to keep Vauxhall’s Ellesmere Port plant (which makes the Astra). But they’re only prepared to guarantee the Luton plant’s survival until 2013, at which point they’ll make a decision on its longer-term future. That doesn’t sound terribly promising – particularly since the plant currently makes some vans for Renault, and the French firm apparently might be able to wriggle out of the deal now it’s under new ownership. Magna has previously suggested it would have to make 10,000 job cuts across Europe, 12% of which were likely to be in Britain. That equates to about 1,200 jobs – over a fifth of the UK workforce.

We suspect that much of it will come down to how deep the UK government is prepared to dig to keep the factories going. Lord Mandelson has thus far been pressing for the decision to be made on a ‘commercial’ basis (presumably because we haven’t got as much cash to throw at it as the Germans - and the UK government's record in intervening in the car industry is pretty pathetic, as today's report on the Rover fiasco proves). But that particular principle might go out of the window if he can avoid some high-profile job cuts in election year...

In today's bulletin:

Row erupts as Rover enquiry slams directors - but clears Government
Wetherspoon still merry after record sales
Police raid Sports Direct after JJB blows the whistle
Fears mount for Vauxhall as GM picks Magna
Making your case, with YouTube

Find this article useful?

Get more great articles like this in your inbox every lunchtime

A leadership thought: Treat your colleagues like customers

One minute briefing: Create a platform where others can see their success, says AVEVA CEO...

The ignominious death of Gordon Gekko

Profit at all costs is a defunct philosophy, and purpose a corporate superpower, argues this...

Gender bias is kept alive by those who think it is dead

Research: Greater representation of women does not automatically lead to equal treatment.

What I learned leading a Syrian bank through a civil war

Louai Al Roumani was CFO of Syria's largest private retail bank when the conflict broke...

Martin Sorrell: “There’s something about the unfairness of it that drives me”

EXCLUSIVE: The agency juggernaut on bouncing back, what he would do with WPP and why...

The 10 values that will matter most after COVID-19

According to a survey of Management Today readers.